slon but enough to affect eIght per cent of all "experienced" workers and to create pockets of unemployment-the rate ran up to ninety per cent of black adolescent job seekers in some ghetto areas. In Europe, the problem was less severe, because the European boom had utilized the labor of imported merce- naries, mainly from Yugoslavia, Greece, and Turkey When the boom stopped, these recruits to the labor army were shipped home in large numbers. None- theless, production fell sufficiently so that unemployment among native Ger- mans and Frenchmen and Britons be- came a social and political issue for the first time in twenty years. Following that global downturn, almost all capitalist economies have recovered to a consIderable degree. Japan reversed its decline within two years. By early 1 978, production was about four or five per cent above pre- crisis levels in most of Europe; only Britain had failed to regain its former peak. In the United States, output was by then about nine per cent above pre-collapse levels, and unemployment had fallen by about a fourth from its peak, although it was still seriously worse than in 1973. In Europe, the unemployment issue remained live, but not charged. Only in the peripheral countries to which the "guest work- ers" returned was it a heavy burden, but these were countries with relatively large rural work forces and with net- works of extended families, both of which absorb and "hide" unemploy- ment. Thus, there is a good deal of evi- dence that the crisis that began in ] 973 has been weathered and that a resump- tIon of the upward trend has already commenced, although perhaps at a somewhat slower pace. Yet a sense of a problem unsolved lingers on. The price of gold has reached record heights-testimony to the beliefs of in- vestors around the world as to the un- reliability of stocks and bonds and con- ventional money. The dollar has be- come a currency that foreign banks and governments will no longer hold in unlimited amounts. Books like Paul Erdman's "The Crash of '79," prophesying complete financial break- down, exert a fascination that suggests and perhaps breeds belief. The talk in financial circles is of another crisis ahead; of long-term structural prob- lems that are barely recognized, much less overcome; of a European com- munity that is fighting demoralization; of an American economy unable to generate momentum; of an inflation that no one even pretends to be able to manage; of the need for a "real" depression to cleanse the system-pro- vided that it does not do it in. How much truth may lie in these dark forebodings is a matter we shall consider in due course. But first we must complete the patient's history. For, unlike most crises in the past, in which the precipitating factor is beyond discovery, the 1 973-74 "revulsion" has an immediately identifiable cause This was the sudden increase in the price of oil by the Organization of Petroleum Exporting Countries ( OPEC) In the fall of 1 973, after the Israeli-Arab conflict broke out into fighting again. Within a few months, the price of oil had quadrupled, and the capitalist oil-using nations found them- selves facing an annual bill for petrole- um in excess of a hundred billion dol- lars. The consequences were shock waves of alarm. "A landslide of immense pro- portìons is rumblIng downhill towards most of the oil-consuming industrial- ized world," wrote The Economist, ". . . a landslide capable of breaking the financial system and the economies of several major countries." U nques- tionably, oil shock triggered the crisis. But the continuing high price of oil is by no means responsible for the op- pressive mood that remains. The Arab nations did not, as feared, sit on their immense oil proceeds but exerted ev- ery effort to recycle the money into Western hands. A sheer physical short- age of oil, of the kind that caused lines at gas pumps during the brief period of the oil embargo, was never re- peated; in fact, by 1 978 there was a surplus of oil looking for buyers at the high prices maintained by the OPEC cartel. More evidence th t oil was not \ -.:;., "':. ,.. -::=- - . - Ijt ( . ., - ': 1. - . . "ll r]f. \1 ., 1\1\ \\'\, ,'- . '-- . ' I\ "," r"-l\I' , \\\\\ ) \\\ \ " c:. \\. . , ". \\ '. .. ""-., ", . , \\ 55 responsible for the refusal of the CfISIS to dissipate itself could be seen In the quick recovery of Japan, the most vulnerable of an the oil importers, and the persistent sluggishness of Britain, a capitalist economy that has actually developed its o\vn oil resources since the OPEC crisis. (Norway, which shared in the North Sea oIl fields, also experi- enced a recession.) Thus, oil shock can be blamed for the onset of the worldwide capitalist crisis but not for its subsequent history. Rather, it seems clear that oil precip- itated the present global recession much as the Great Crash of Wall Street pre- cipitated the Depression of the nine- teen-thirties. In both cases, the cause of the persisting trouble seemed to be in the system itself, which gave way like an overstrained structure subjected to a telling blow. C APITALISM has always labored under self-imposed tensions of one kind or another, the consequence of its restless but uncoördinated acquisitive drive. But in recent years a main cause-perhaps the main cause-of this tension has been the problem of infla- tion. Inflation has become so widely ac- cepted as an inevitable aspect of eco- nomic life that it comes as something of a surprIse to recall that it was not infla- tion but deflation-falling prices-that was the primary problem in the earlier history of capitalism. Between 1823 and 1848, for example, wholesale prices in the United States fen by twenty per cent. They were pushed upward by the Civil War, but between 1873 and 1898 pnces fell by almost fifty per cent, so that at the end of the nineteenth century they were actually below the level of 1823, the Civil War notwith- standing The same is true elsewhere. In England, for instance, wholesale prIces fell from the eighteen-seventies unnl the turn of the century. In West Germany, as well, the level of whole- sale prices in 1 91 0 was below that in 1880. Bursts of inflation have always ap- peared with the advent of war, and during some decades prices have drifted gently upward. But nothing like the phenomenon that we have come to ac- " 1 " d " I f cept as norma appeare untl a ter the Second World War. Then, begin- ning in the early nineteen-fifties, after the wreckage of the war was cleared away, came an international upward creep, averaging no more than 2.5 per cent a year until 1960. Thereafter, the creep became a trot. From 1 960 to 1 970, the average rate of inflation for the ten major capitalist nations rose to